CALIFORNIA | HEARD ON THE BEAT / ENERGY

A Surge of Cash

Alternative Energy Firms Are Getting $540 Million to Help Them Better Compete

Before the state's new electricity deregulation law cuts alternative energy producers loose in 2002 to fend for themselves, it will throw them an important carrot: about $540 million in cash to help the industry become competitive in the free market.

The California Energy Commission this week began hearings on how to distribute the cash to producers of wind, solar, geothermal, biomass and other forms of energy. The commission will send a plan to the Legislature for a vote in March. All sorts of uses are being suggested: rebates to users of "green energy," marketing campaigns, straight cash awards to companies to finance new equipment and research.

Although a short-term cash fix may make the most efficient renewables, such as wind and geothermal energy, financially viable, industry officials admit it will take more to save biomass, the least competitive of the major renewable energy sources but perhaps the most beneficial from an environmental standpoint.

Biomass--a method of steam generation that consumed 7.5 million tons of forest and agricultural waste last year--eliminates 95% of the pollution that open field burning of timber and dead orchards used to create. It also accounted for 750 megawatts of total electricity generation last year, or enough to light San Francisco.

The problem is the cost of collecting biomass fuel--wood chips produced from forest, lumber and agricultural waste. No matter how efficient the operation, the cost of chippers, manpower and trucks to collect the fuel is too high for biomass to be competitive.

The California Biomass Energy Alliance, a trade group representing the state's 40 biomass plant operators, wants more than cash from legislators. It seeks tax incentives that would induce waste producers to shoulder more of the cost of delivering fuel to the plants.

But after two decades of costly subsidies, the mood in Sacramento seems against further tax incentives for alternative energy producers, said Jan Smutney-Jones, executive director of the Independent Energy Producers.